"This idea of nationalizing banks is not comfortable, but I think we have gotten so many toxic assets spread throughout the banking and financial community throughout the world that we're going to have to do something that no one ever envisioned a year ago, no one likes," Graham said. "But, to me, banking and housing are the root cause of this problem. And I'm very much afraid that any program to salvage the bank is going to require the government.."

"The fact that Lindsay Graham, a conservative Republican, says that nationalization should be on the table, I think underscores the sense of crisis," Stuart Rothenberg, editor of The Rothenberg Political Report, told ABC News. "And that could give the president a good deal of political capital and leeway."

"We want to retain a strong sense of private capital fulfilling the core investment needs of this country," Obama said.

But some prominent economists, including Nobel prize winner Paul Krugman, say nationalization is the only way out of the out of the current financial crisis, given that the nation's largest banks are now carrying a crushing half a trillion dollars in bad debt.

"The chances of your being able to do this without nationalizing at least a couple of really troubled banks are not too good," Krugman told ABC.

This week, as part of Obama's plan, the nation's banks will start to undergo what are being called "stress tests" to find out just how much trouble they are in. When those results are in, Krugman says, federal officials will have only once choice.

"They're going to go in there and do a Claude Raines from 'Casablanca': 'I'm shocked -- shocked -- to discover that these banks are in so much trouble financially.' And then seize them," Krugman said.